A recent World Bank report has revealed that Sub-Saharan Africa remains the region with the highest cost of remittance.
The cost of sending money to countries in the region from the diaspora, rose in 2023, with fees reaching up to 36% for every $200 sent from abroad, which saw it maintain its position as the most expensive region to send money for the 15th consecutive year.
In a year-on-year analysis, there was a slight increase in the average cost of sending $200 to sub-Saharan Africa, rising to 7.9% in the second quarter (Q2) of 2023, from 7.8% in the same period in 2022.
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Part of the World Bank report reads,
“Sub-Saharan Africa remains the region with the highest remittance costs. The average cost of sending $200 to the Sub-Saharan Africa region slightly increased, averaging 7.9% in 2023Q2 compared with 7.2% in 2022Q2. A stable price has been observed in remittance costs in the region since 2021, but this average remains far above the global average of 6.9% and the SDG target of 3% by 2030.
“Costs vary substantially across the region, ranging from 1.3–4.5% in the lowest cost corridors to 17–36% in the highest. For example, sending $200 in remittances from Tanzania to neighboring Uganda would have cost a migrant 39.1% in 2023 Q2”.
According to the report, Nigeria leads in the ranking of countries in SSA with the highest remittance cost. The country topped remittance recipients in 2023 with $20.5bn, accounting for a major portion of remittance flows to the sub-Saharan African region.
Nigeria was followed by Ghana and Kenya, accounting for $4.9bn and $4.2bn respectively. According to the World Bank, the global average cost of remittances to the region is still high, at above 6.9 percent.
The bank further highlighted traditional banks as a major contributor to the increase in remittance fees, which are being identified as the entities charging the highest costs.
Banks continue to be the costliest channel for sending remittances (with an average cost of 12.1%), followed by post offices (7%), money transfer operators (5.3%), and mobile operators (4.1%).
“Banks charge the highest costs, thus emphasizing the importance of cross-border mobile money transactions. In Kenya, Rwanda, Tanzania, and Uganda, such transactions are constrained by limited interoperability among telecom operators and money transfer operators,” the World Bank added.
However, the Bank expressed concern that remittance costs remain high, which saw Dilip Ratha, a World Bank lead economist disclose that in recent years, remittance flows to developing countries have surpassed the sum of foreign direct investment and official development assistance.
The implication is that migrants lose hard-earned millions of dollars annually in remittance charges. Meanwhile, while there are concerns about the high cost of remittance to Sub-Saharan Africa, recent reports suggest that Nigerian banks will impose an electronic money transfer levy on foreign currency inflows equivalent to N10,000 and above from January 2024.
This initiative is anticipated to worsen the high cost of remittance, potentially diverting more forex transactions to unofficial markets.